Butler & Cook, Inc. v. Centerpoint Energy Gas Transmission Company et al

Filing 16

MEMORANDUM OPINION AND ORDER denying 7 Plaintiff's Motion to Remand and dismissing separate defendant Billy Carter. All parties to bear their own costs and fees. Signed by Honorable Robert T. Dawson on September 18, 2012. (sh) Modified to add text on 9/18/2012 (sh).

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION

BUTLER & COOK, INC.

PLAINTIFF

v.

Case No. 2:12-2107

CENTERPOINT ENERGY GAS
TRANSMISSION COMPANY and
BILLY CARTER

DEFENDANTS

MEMORANDUM OPINION AND ORDER
Before

the

Court

are

Plaintiff

Butler

&

Cook,

Inc.’s

(“B&C”) Motion to Remand (Doc. 7) and Brief in Support (Doc. 8),
Defendant

CenterPoint

Energy

Gas

Transmission

Company’s

(“CenterPoint”) Response (Doc. 13), and Plaintiff’s Reply (Doc.
14) and Brief in Support (Doc. 15). For reasons set forth below,
Plaintiff’s Motion to Remand (Doc. 7) is DENIED.
I.

Background
B&C filed an Amended Complaint in Sebastian County Circuit

Court

on

(“Carter”)

May

17,

2012,

alleging

against

breach

of

CenterPoint

contract,

and

Billy

promissory

Carter

estoppel,

unjust enrichment, fraud and constructive fraud, and violation
of

Arkansas’

Deceptive

Trade

Practices

Act.

(Doc.

2).

Defendant CenterPoint removed the matter to this Court, alleging
that co-defendant Carter was fraudulently joined for the purpose
of

defeating

corporation,

diversity.
Carter

is

(Doc.

an

1).

Arkansas

Page 1 of 14

B&C
resident

is
and

an

Arkansas

employee

of

CenterPoint and CenterPoint is a Delaware corporation with its
principal place of business in Houston, Texas, doing business in
Arkansas.

(Doc. 2).

On May 21, 2012, B&C filed a Motion to Remand the case to
State

Court,

contending

Carter

was

properly

necessary party to avoid piecemeal litigation.

joined

as

(Doc. 7).

a
B&C

contends this Court lacks diversity jurisdiction because B&C and
Carter

are

arguing

B&C

both
has

Arkansas
not

citizens.

shown

more

CenterPoint
than

a

mere

responded,
theoretical

possibility of recovery against Carter and thus the joinder was
improper.

(Doc. 13).

For purposes of this Motion, the following facts, taken
from the Complaint, are assumed true and viewed in the light
most favorable to B&C.

B&C operates a machine shop serving

local manufacturers and oil-and-gas firms in performing repairs
and maintenance on industrial machinery and hydraulic equipment,
tooling steel, and fabricating parts for industrial machinery.
For two-and-a-half years CenterPoint hired B&C to repair and
maintain hydraulic equipment used in its Fort Smith, Arkansas,
operations.

Such repairs were performed pursuant to a Master

Service Agreement (“MSA”), executed in September, 2009.

(Doc.

1, Ex. 4). The Amended Complaint does not concern work done
pursuant

to

CenterPoint’s

the

MSA

or

personal

repairs

and

maintenance

property

but

only

Page 2 of 14

the

performed
use

of

on

B&C’s

workforce assets in connection with real property fixtures owned
by CenterPoint.

Nonetheless, portions of the MSA are applicable

to this matter.

Section II C provides:

The execution of this Agreement by Company and
Contractor does not obligate Company to offer any work
to Contractor nor does it obligate Contractor to
accept any work offered or requested by Company.
Rather, the parties shall only be bound to the terms
of this Agreement upon the issuance and acceptance of
a Work Order properly executed by representatives of
both parties. Each properly executed Work Order shall
be deemed a separate contract between the parties.
(Doc. 1, Ex. 4, P. 2).
Section IV D provides:
Company shall designate in writing to Contractor,
prior
to
the
commencement
of
the
Work,
a
representative who shall be fully acquainted with the
Work and who has authority on behalf of Company to
approve changes in the scope of the Work, approve any
daily
reports
submitted
by
Contractor,
render
decisions
promptly,
and
furnish
information
expeditiously.
(Doc. 1, Ex. 4, P. 8).
Arkansas

requires

parties

to

hold

a

license

when

they

undertake to construct or repair improvements to real property
such as a pipeline. (Doc. 2, P. 6).

No such license is required

to do mechanical and fabricating work on personal property.

The

Amended Complaint states that as CenterPoint’s manager 1, Carter
promised

B&C

that

if

it

would

spend

the

money

required

to

qualify for a license, CenterPoint would add B&C as an approved
1

CenterPoint argues that Carter was not a manager;
Technician Line Stop and Hot Tap.” (Doc. 13, P. 6).

Page 3 of 14

his

title

was

“Lead

vendor

for

working

on

its

pipelines.

(Doc.

2,

P.

5).

In

September, 2010, B&C released two of its employees to work for
CenterPoint through a temporary agency, and began the process of
obtaining
temporary

a

contractor’s

service

license.

approximately

CenterPoint

$30.00

per

hour

paid
per

the

worker,

which is less than the $65.00 hourly rate B&C and other outside
machine

shops

would

charge

through a temporary agency.
every

requirement

for

the

same

work

without

going

By January 2011, B&C had fulfilled

specified

by

Carter,

but

neither

he

nor

CenterPoint assigned work directly to B&C, even though they were
aware B&C had obtained the license Carter demanded. (Doc. 2, P.
6).

Instead, CenterPoint continued to assign work through the

temporary agency, at the reduced rate.
insisted

that

in

order

for

B&C’s

Carter allegedly also

trained

welders

to

work

directly for CenterPoint, they must be certified. After B&C was
licensed

and

its

continued

to

temporary

agency.

employees

utilize
The

B&C

had

been

employees

Amended

certified,
by

Complaint

going
alleges

CenterPoint
through

the

Carter

and

CenterPoint never intended for B&C to benefit from CenterPoint’s
exploitation of B&C’s assets, and Carter and CenterPoint knew by
December 2010, or shortly thereafter, that B&C would not be paid
shop rates for those services. According to B&C, Carter never
communicated CenterPoint’s decision not to pay B&C directly for
the use of its workers. (Doc. 2, P. 7).
Page 4 of 14

The

Amended

Complaint

alleges

B&C’s

Chief

Operating

Officer, Danny Wilson, made repeated efforts to contact Carter
in order to collect money allegedly owed to B&C for the use of
its workers. (Doc. 2, P. 7).

B&C asserts Carter issued false

assurances that work orders and payment would be forthcoming,
and continued using B&C workers through the temporary agency.
In

August

2011,

Carter

referred

Wilson

to

Garry

Director of Design Engineering at CenterPoint.
Bassett of his dealings with Carter.

Bassett,

Wilson advised

B&C alleges Bassett told

it he was aware of the dealings between B&C and Carter and would
see to it that B&C was paid.
statement

was

fraudulent,

The Amended Complaint argues this
and

Bassett

and

CenterPoint

were

determined to “string the Plaintiff along” and accept valuable
benefits they knew B&C expected payment for, but for which they
never intended to authorize payment to B&C.

B&C claims it is

the victim of a “scheme” instrumented by Carter and CenterPoint.
The Amended Complaint alleges Carter managed CenterPoint’s
facility
authority

in
to

Fort

Smith

direct

and

had

operations

the

actual

conducted

by

and/or
the

apparent

Fort

Smith

office on a day-to-day basis and the apparent authority to bind
CenterPoint

to

pay

the

reasonable

beneficially provided to CenterPoint.

value

of

any

services

(Doc. 2, P. 3).

The

Amended Complaint further states that if Carter knew that he did
not have actual authority to bind CenterPoint to contracts, then
Page 5 of 14

the fact that he promised compensation and future benefits to
induce

B&C

to

part

with

actually fraudulent.
liability

for

valuable

workforce

assets

would

be

In that case, according to B&C, Carter’s

that

conduct

would

be

personal.

The

Amended

Complaint asserts Carter was an actual employee and agent of
CenterPoint,

and

employment.

B&C contends because Carter induced B&C to part

with

acted

consideration

in

that

the

course

afforded

CenterPoint,

any

statements

CenterPoint,

even

if

by

and

an

actual

Carter

fraudulent.

As

a

scope

are

of

his

benefit

to

attributable

result,

B&C

to

alleges,

CenterPoint is liable for the damages caused by those statements
based

on

the

doctrine

of

respondeat

superior,

and

also

chargeable with notice of any facts known by Carter during the
course and scope of his employment.
B&C

seeks

damages

in

the

$100,000.00

in

CenterPoint.

amount

damages

of

from

$67,275.00

both

Carter

and

(Doc. 2, P. 15).

II.

punitive

(Doc. 2, P. 7).

and

Standard of Review
The Eighth Circuit has defined fraudulent joinder as “the

filing of a frivolous or otherwise illegitimate claim against a
non-diverse

defendant

solely

to

prevent

removal.”

Filla

v.

Norfolk Southern Ry. Co., 336 F.3d 806, 809 (8th Cir. 2003).
Fraudulent

joinder

exists

when

a

party

has

deprive the federal court of jurisdiction.
Page 6 of 14

been

joined

to

Anderson v. Home

Ins.

Co.,

724

F.2d

82,

84

(8th

Cir.

1983).

The

burden

of

proving fraudulent joinder rests on the removing defendant, and
all

doubts

should

be

resolved

in

favor

of

remand.

In

re

Business Men’s Assurance Co. of Am., 992 F.2d 181, 183 (8th Cir.
1993).
In assessing a fraudulent joinder claim, the Court “must
simply

determine

whether

there

is

a

reasonable

basis

for

predicting that the state’s law might impose liability against
the

defendant.”

Filla

at

811.

This

means

the

Court

must

determine whether Arkansas law might impose liability against
Carter

for

either

breach

of

contract,

promissory

estoppel,

unjust enrichment, fraud or violation of the Arkansas Deceptive
Trade Practices Act.
III. Discussion
B&C argues that if the Court were to find that CenterPoint
is not bound by the contract, it should find that Carter is
bound.

In Lasater v. Crutchfield, 92 Ark. 535 (Ark. 1909), the

Arkansas Supreme Court held that an employee who acted beyond
the

scope

of

contract.

his

employment

became

personally

liable

on

the

However, B&C has not alleged facts which show the

representations of Carter rose to the level of a contractual
promise,

or

willingness
obtaining

anything
to

proper

other

contract

than

a

mere

contingent

certification.

In

Page 7 of 14

indication

upon
fact,

B&C’s

of

future

employees

nowhere

in

its

complaint

does

B&C

mention

breach of contract.
Garry

Basset,

“confirmed

a

his

recompense.”

Carter’s

potential

liability

for

On the contrary, B&C alleges that it was
CenterPoint

knowledge

of

executive
the

(Doc. 2, P. 11).

in

Louisiana,

arrangement

and

who

promised

Further, the Complaint alleges

that B&C “entered a contract with CenterPoint obliging Butler &
Cook

to

obtain

a

13)(emphasis added).

contractor’s

license....”

(Doc.

2,

P.

According to the Complaint, Carter simply

“approached Butler & Cook with a proposal to have Butler & Cook
send some of its employees out to operate “hot tap” equipment on
pipelines....”

(Doc. 2, P. 9).

Based on B&C’s own allegations

there is no basis for arguing that Carter is personally liable
on

a

contract

he

may

or

may

not

have

entered

into

on

CenterPoint’s behalf.
To state a claim for fraud, a plaintiff must plead the
existence

of

five

elements:

(1)

a

false

representation

of

material fact; (2) knowledge that the representation is false or
that

there

is

representation;

insufficient

evidence

(3)

to

intent

induce

upon

which

action

or

to

make

the

inaction

in

reliance upon the representation; (4) justifiable reliance upon
the representation; and (5) damage suffered as a result of the
reliance.

DePriest

v.

AstraZeneca

Pharmaceuticals,

L.P.

2009 Ark. 547 (2009); McAdams v. Ellington, 333 Ark. 362 (1998).
B&C alleges in its Complaint that it was motivated to incur the
Page 8 of 14

losses

it

did

“because

Carter

had

promised

benefits

in

the

future.”

(Doc. 2, P. 10).

The Arkansas Supreme Court has often

affirmed

that

of

projections

future

events

or

a

promise

future conduct may not form the basis of a fraud claim.
Tee,

Inc.

v.

Venture

Golf

of

Golden

Schools,

Inc.,

333 Ark. 253 (1998); South County, Inc. v. First Western Loan
Co., 315 Ark. 722 (1994).
predicting

that

B&C

can

There is no reasonable basis for
establish

a

claim

against

Carter

personally for fraud.
The

law

on

promissory

estoppel

is

set

out

in

the

Restatement (Second) of Contracts:
A promise which the promisor should reasonably expect
to induce action or forbearance on the part of the
promisee or a third person and which does induce such
action or forbearance is binding if injustice can be
avoided only by enforcement of the promise. The remedy
granted for breach may be limited as justice requires.
See K.C. Props. v. Lowell, 373 Ark. 14 (2008); Rigsby v. Rigsby,
356 Ark. 311 (2004).
Liability for fraud and promissory estoppel both depend on
the reasonableness of the plaintiff’s reliance on defendant’s
statements.

Given

the

language

in

the

MSA

that

only

representatives who are designated in writing have the authority
to bind CenterPoint, that CenterPoint is not obligated to offer
any work to B&C and that the parties are only bound upon the
issuance and acceptance of a properly executed work order, it

Page 9 of 14

was patently unreasonable for either Carter or B&C to believe
that B&C could rely on statements made by Carter.
there

is

establish

no
a

reasonable
claim

basis

against

for

Carter

predicting

Accordingly,
that

personally

for

B&C

can

Promissory

Estoppel.
To

find

unjust

enrichment,

a

party

must

have

received

something of value, to which he or she is not entitled and which
he or she must restore. See El Paso Prod. Co. v. Blanchard, 371
Ark. 634 (2007).

In its Amended Complaint, Plaintiff alleges

that Carter and CenterPoint are jointly and severally liable for
$67,275.00, or alternatively $66,500.00 payable by CenterPoint
only.

(Doc. 2, P. 14).

amount

that

CenterPoint

This figure supposedly represents the
would

have

had

to

pay

B&C

for

work

performed had it hired B&C directly as opposed to going through
a temporary service and paying a reduced hourly rate, plus the
fees

and

costs

associated

with

obtaining

certification and hiring additional workers.

licensure

and

This theory of

recovery fails for two reasons.
First, Carter did not receive any benefit from B&C as a
result of his statements or promises.

In its damage claim, B&C

states that CenterPoint was unjustly enriched in the amount of
no less than $52,500.

(Doc. 2, P. 12)(Emphasis added).

Nowhere

in the Amended Complaint does B&C allege that Carter received

Page 10 of 14

anything of value which he should be required to restore to
avoid injustice.
Second, the facts alleged in the Complaint do not indicate
that CenterPoint was unjustly enriched by Carter’s actions.

The

fact

its

that

B&C

believed

that

CenterPoint

should

hire

employees directly at the higher hourly rate matters little when
what actually happened was that CenterPoint continued to use the
same employees through the temporary agency at a reduced rate.
In general, the focus of unjust enrichment is based on what the
enriched person received rather than what the opposing party
lost.

Grisanti v. Zanone, 2012 Ark. App. 545 (Ark. App. 2009);

Feagin

v.

Jackson,

2012

WL

1522297

at

*8

(Ark.

App.

2012).

Although B&C alleges that CenterPoint was unjustly enriched in
the

amount

for

which

it

claims

its

services

are

worth,

the

actual value of the services performed is what the temporary
agency charged for the work and CenterPoint paid for it.

There

is no reasonable basis for predicting that B&C can establish
liability against Carter personally under the theory of unjust
enrichment.
CenterPoint argues that as a consumer protection statute,
the Arkansas Deceptive Trade Practices Act does not apply to
B&C.

(Doc. 1, P. 8).

that

the

Arkansas

However, this Court has previously held

Deceptive

Trade

Practices

Act

does

not

conclude that business entities or non-consumers cannot utilize
Page 11 of 14

its provisions as a basis for recovery.

Valor Healthcare, Inc.

v.

LEXIS

Pinkerton,

et.

al,

2008

U.S.

Dist.

105988

(Western

District Arkansas, December 23, 2008); see Ark. Code Ann. § 488-101.
any

Plaintiff does not allege, or set forth any facts with

specificity,

representation
benefits,

as

that
to

Carter

the

alterations,

knowingly

made

“characteristics,
source,

any

ingredients,

sponsorship,

false
uses,

approval,

or

certification of goods or services or as to whether goods are
original or new or of a particular standard, quality, grade,
style or model.”

See Ark. Code Ann. § 4-88-107(a)(1).

All of

the alleged statements attributed to Carter are with respect to
inducing

B&C

to

pursue

certification

and

licensure

with

the

promise to hire their employees directly instead of indirectly
through a temporary agency.
unfair
showing

business
that

deceptive

practice,

Carter

act

or

In order to state a claim for an
B&C

engaged

practice

in
in

Ark.Code Ann. § 4–88–107(a)(10).

is
an

required

to

allege

unconscionable,

business,

commerce

facts

false,
or

or

trade.

The word “unconscionable” has

been defined to mean an act that affronts the sense of justice,
decency, and reasonableness. Baptist Health v. Murphy, 365 Ark.
115 (2006).

Here, B&C alleges that Carter falsely represented

that if B&C would obtain certain certification and licensure,
CenterPoint would hire B&C’s employees directly at a higher rate
than they were paying to the temporary agency.
Page 12 of 14

In its prayer

for relief, B&C seeks damages for the earnings B&C would have
made if the alleged contract had been performed and the benefits
that B&C paid to secure the continued services of workers whom
it made available for CenterPoint’s use.

Although labeled as

“deceptive”

alleged

and

“unconscionable”,

Carter’s

wrongs

are

not of the type and character as to bring them within the scope
of

the

Arkansas

performance

of

Deceptive

a

duty

Trade

under

a

Practices

contract

is

Act.

When

the

contemplated,

the

nonperformance of that duty is most typically known as a breach.
Taylor v. George, 92 Ark. App. 264 (2005).

In its prayer for

relief, B&C seeks damages to recover the amount it expended in
reliance on Carter’s statements and the amount it would have
received

had

CenterPoint

hired

its

employees

directly.

The

claims stated by B&C constitute, if anything, an ordinary breach
of contract claim that does not rise to the level of violating
the Arkansas Deceptive Trade Practices Act.

See CEI Engineering

Associates, Inc. v. Elder Construction Company, 2009 Ark. App.
259

(Ark.

arbitration

App.
of

2009)(Trial
plaintiff’s

court

Arkansas

erred

by

Deceptive

not

compelling

Trade

Practices

Act claim because the true character of the claim was for breach
of contract.)
There is no reasonable basis for predicting that Arkansas
law might impose liability against in-state defendant Carter for
either

breach

of

contract,

unjust

Page 13 of 14

enrichment,

promissory

estoppel, fraud or violation of the Arkansas Deceptive Trade
Practices

Act.

Accordingly,

the

Court

finds

that

Defendant

Carter was fraudulently joined in these proceedings in order to
defeat

federal

jurisdiction.

Billy

Carter

is

therefore

dismissed from this action without prejudice.
IV.

Conclusion
For

the

reasons

set

Remand (Doc. 7) is DENIED.

out

herein,

Plaintiff’s

Motion

to

Defendant Billy Carter is dismissed

without prejudice and the Court’s jurisdiction over this matter
is proper pursuant to 28 U.S.C. §1332 (a)(1).

All parties are

to bear their own costs and fees.
IT IS SO ORDERED this 18th day of September, 2012.

/s/ Robert T. Dawson
Honorable Robert T. Dawson
United States District Judge

Page 14 of 14